United States Sugar Equalization Board v. P. De Ronde & Co.

• Decision Date: 10 August 1925
• Docket Number: No. 3195.,3195.
• Citation: 7 F.2d 981
• Parties: UNITED STATES SUGAR EQUALIZATION BOARD, Inc., v. P. DE RONDE & CO. Inc.
• Court: U.S. Court of Appeals — Third Circuit

7 F.2d 981 (1925)

UNITED STATES SUGAR EQUALIZATION BOARD, Inc., v. P. DE RONDE & CO. Inc.^*

No. 3195.

Circuit Court of Appeals, Third Circuit.

August 10, 1925.

William A. Glasgow, Jr., of Philadelphia, Pa., Edwin P. Shattuck, of New York City, and Charles F. Curley, of Wilmington, Del., for appellant.

Robert H. Richards, of Wilmington, Del., and Joseph M. Hartfield, Jeremiah M. Evarts, and White & Case, all of New York City, for appellee.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

DAVIS, Circuit Judge.

This is an appeal from a decree of the District Court restraining the United States Sugar Equalization Board, Inc., hereinafter called the board, from disposing of its property, distributing its assets, and dividing its capital stock, until it has ascertained and paid to P. De Ronde & Co., Inc., hereinafter called plaintiff, the money representing the loss it sustained in a certain sugar transaction which it entered into and carried on "at the request and under the direction of the Department of Justice."

During the first half of 1920, sugar was selling throughout the United States in excess of 26 cents per pound retail. Under the Food Control Act (Comp. St. 1918, Comp. St. Ann. Supp. 1919, §§ 3115 1/8e-3115 1/8kk, 3115 1/8l-3115 1/8r), as amended by Act Oct. 22, 1919, §§ 1, 2 (Comp. St. Ann. Supp. 1923, §§ 3115 1/8e-3115 1/8ff), the Department of Justice in one way or another undertook to bring about the reduction of the price of sugar, which was believed to be unwarranted. One of the means which it employed was to induce private agencies to import large quantities of sugar into the United States. There was at that time a great deal of sugar in the Argentine Republic, but it could not then be brought into the United States, because there was an embargo against exporting sugar. Through the efforts of the State Department at Washington, the embargo was lifted on May 22, 1920, on a limited amount of sugar. Early in June following, the Department of Justice requested the plaintiff to purchase a quantity of Argentine sugar for importation into the United States, to be sold under its direction, at the price fixed by it, to such essential users as it designated. With the assurance of the department that it would, upon the arrival of the sugar into the United States, attend to its distribution among essential users, canners, preservers, etc., the plaintiff purchased 5,000 tons of sugar between June 15 and June 22, 1920, and arranged for its importation.

The purchase and importation of Argentine sugar was given wide publicity in the public press and otherwise in the United States, and the price of sugar in America began to decline. After the purchase in question, but while the sugar was still in Argentine, the price of sugar in the United States fell lower than that paid by the plaintiff in Argentine. Thereupon the plaintiff requested the Department of Justice to permit a resale in Argentine, but the request was refused, because the department thought that the decline in price was only temporary, and so the plaintiff had to bring the sugar into the United States according to its agreement with the department. By the time the sugar arrived the price was still lower, and there was no market for it. The plaintiff asked permission to reship the sugar to Buenos Aires, where the price was still good, but the department denied this request, because it was feared that such shipment would disturb diplomatic relations between the countries, and so it required the sugar to be sold at such price as could be obtained here, leaving the matter of reimbursement to be determined by the department or Congress. The plaintiff sustained a loss, it is alleged, of nearly $2,000,000.

On July 8, 1918, the President, pursuant to the provision of the Act of July 1, 1918, directed the United States Food Administrator to form a corporation, to be known as the United States Sugar Equalization Board. Five million dollars was appropriated for this purpose. The incorporation was effected, and the United States held and now holds all the stock of the corporation, which purchased the entire Cuban sugar crop of 1919, and sold it largely to the American people, at prices, it is alleged, lower than they would otherwise have been compelled to pay, and made a profit of $39,000,000. At the time of the transaction in question, $30,000,000 of this money had been paid into the Treasury of the United States, and the balance of $9,000,000 remained in the possession of the board.

After fully investigating the facts, Congress found that the plaintiff entered into and carried on this transaction at the request and under the direction of the Department of Justice, and accordingly passed the following Joint Resolution, known as "Public Resolution No. 89, 67th Congress," which was approved February 12, 1923:

"Joint resolution authorizing the President to require the United States Sugar Equalization Board (Incorporated) to take over and dispose of five thousand tons of sugar imported from the Argentine Republic.

"Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, that the President is authorized to require the United States Sugar Equalization Board (Incorporated) to take over from the corporation P. De Ronde and Company (Incorporated) a certain transaction entered into and carried on by said corporation at the request and under the direction of the Department of Justice, which transaction involved the purchase in the Argentine Republic, between the 15th day of June, 1920, and the 22d day of June, 1920, of five thousand tons of sugar, the importation thereof into the United States and the distribution of a portion of the same within the United States, and to require the said United States Sugar Equalization Board (Incorporated) to dispense of any of said sugar so imported remaining undisposed of and to liquidate and adjust the entire transaction, paying to the corporation aforesaid such sum as may be found by said board to represent the actual loss sustained by them in said transaction, and for this purpose the President is authorized to vote or use the stock of the corporation held by him, or otherwise exercise or use his control over the said United States Sugar Equalization Board and its directors, and to continue the said corporation for such time as may be necessary to carry out the intention of this joint resolution."

About three weeks later, March 5, 1923, President Harding wrote to Mr. George A. Zabriskie, president of the board, as follows:

"As you are doubtless aware, the Congress recently authorized the President to make settlement of the claims of P. De Ronde & Co. and the American Trading Company by the United States Sugar Equalization Board. I am inclosing to you herewith copies of the resolution enacted by Congress. I have assumed that the claim of the American Trading Company needs no further investigation, because I have your letter recommending the approval of the bill authorizing its settlement. You did not speak favorably concerning the De Ronde claim. I am writing, therefore, to direct that the board make a very careful inquiry into the worthiness of this claim, with a view to reporting to me concerning the same, if possible, about April 15th. I am not directing the board to take over from the De Ronde Corporation the transaction referred to in the resolution by the Congress. If a settlement of this claim is to be made, I very much desire to negotiate the payment of certain obligations owing to the Emergency Fleet Corporation by P. De Ronde & Co. Such an executive order as is requisite for the settlement of the approved claim of the American Trading Company I will be glad to have you submit to me for my signature."

The board made inquiry in accordance with the direction contained in the President's letter, and in its report to him, which was based on the same evidence that was before the committee of Congress, said that it was "the opinion of the board that no moral or other obligation rests upon the government to recompense P. De Ronde & Co. for the loss sustained. It announces this with some reluctance, inasmuch as two committees of Congress, after hearing the evidence, have found to the contrary." The board thus overruled the action of Congress. Not having been "required" by the President to do so, the board did not "take over" the transaction and pay to the plaintiff the loss sustained by it. It has, in fact, not done any of the things specified in the resolution.

The corporate existence of the board having ceased and expired by the express limitation of its charter in July, 1923, President Coolidge, on October 6th of that year, wrote the president of the board as follows:

"Inasmuch as the Sugar Board has declined to recommend to the Executive Board that the De Ronde claims should be indemnified from the resources of the board, and therefore no call upon its resources for this purpose is now contemplated, it seems to me highly desirable that the board should be completely wound up. I would be glad indeed if you would let me know if its activities should not be terminated and its final resources at once remitted to the Treasury and the board dissolved."

On being informed that the board intended to wind up its affairs and distribute its assets, the plaintiff filed its bill on November 2, 1923, praying, among other things, that the board be enjoined from disposing of or conveying its property, from dividing its capital stock, and from distributing its assets to its stockholders until it had taken over the sugar transaction and ascertained and paid the plaintiff the loss which it had sustained. The cause came before the court on a motion for a preliminary injunction and a motion to dismiss the bill of plaintiff.

It is conceded by the plaintiff that the sugar transaction in itself did not create a legal and valid debt against the government for its loss. It is...